MIDATHALA NARAYANAPPA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE following questions have been referred to this court for its opinion under section 66 (2) of the Indian Income-tax Act :

(2.) THE reference relates to the assessment year 1948-49, the accounting year being the year ended March 31, 1948. In quantum assessment, it was found by the concerned income-tax Officer that there was manipulation of accounts in forward contracts entered into by the assessee and that fictitious losses were claimed. THE trading results were also shown to be very poor. So, the Income-tax Officer, Anantapur, issued notice under section 28(3) of the Income-tax Act calling upon the assessee to show cause why penalty should not be levied for concealment of income. An explanation was submitted but it was rejected by the Income-tax Officer and he reached the conclusion that the assessee had concealed his income and deliberately furnished inaccurate particulars thereof. In this view of the matter, he levied a penalty of Rs. 17,500.

(3.) THE question that calls for decision in this reference is whether the penalty proceedings were bad for the reason that by the time of service of notice under section 28(3) there was a partial partition of the family. It is contended on behalf of the assessee by Sri Ramachandra Rao, his learned counsel, that the partition has resulted in the disruption of the joint family as could be seen from the partition deed and a notice under section 28(3) could not be issued to the members of the defunct family. THEre is no provision in the Indian Income-tax Act enabling the department to impose penalty on the members of the family, after they became divided, in respect of concealment of income, and the penalty levied could not be recovered from the members after the division in status of the family, continues the learned counsel. This argument is founded on a judgment of a Division Bench of this court in Subba Rao Nageswara Rao v. Commissioner of Income-tax. We do not think that this argument is sound. Nor has the ruling called in aid by the learned counsel for the assessee any analogy here. THE argument is based on the assumption that there has been a disruption of the joint family.